Question

​(Financial forecastinglong dashdiscretionary financing needs​) J. T.​ Jarmon, Inc. has been in business for only 1​ year, and the CFO expects that the relationship between firm sales and its operating​ expenses, current​ assets, net fixed​ assets, and current liabilities will remain at their current proportion of sales. Last​ year, Jarmon had ​$13 million in sales and net income of ​$1.30 million. The firm anticipates that next​ year's sales will reach ​$16.250 ​million, with net income rising to ​$1.43 million. Given its present high rate of​ growth, the firm retains all its earnings to help defray the cost of new investments. The​ firm's balance sheet for 2018 is found in the popup​ window:

BALANCE SHEET      
   12/31/2018   % OF SALES
Current assets   3,250,000   25%
Net fixed assets   6,500,000   50%
Total   9,750,000  
LIABILITIES AND OWNER'S EQUITY      
Accounts payable   3,250,000   25%
Long-term debt   1,300,000  
Total liabilities   4,550,000  
Common stock   1,000,000  
Paid-in capital   2,900,000  
Retained earnings   1,300,000  
Common equity   5,200,000  
Total   9,750,000  

Using the information​ provided, make an estimate of​ Jarmon's financing requirements or total assets for 2019 and its discretionary financing needs

​(DFN​).

What are​ Jarmon's financing requirements or total assets for​ 2019?  

​$__ (Round to the nearest​ dollar.)

Answer 1

Estimation of​ Jarmon's financing requirements or total assets for 2019 is calculated as follows:

Given			Estimated sales		16250000
Balance Sheet as on 31.12.2018			Estimation for the year ended 31.12.2019
ASSETS	Amount	% of sales	ASSETS	Amount
Current assets	32,50,000	25%	Current assets	40,62,500
Net fixed assets	65,00,000	50%	Net fixed assets	81,25,000
	97,50,000		Total Asset	1,21,87,500
LIABILITIES AND OWNER'S EQUITY			LIABILITIES AND OWNER'S EQUITY
Accounts payable	32,50,000	25%	Accounts payable	40,62,500
Long-term debt	13,00,000		Long-term debt	13,00,000
Total liabilities	45,50,000		Total liabilities	53,62,500
Common stock	10,00,000		Common stock	10,00,000
Paid-in capital	29,00,000		Paid-in capital	29,00,000
Retained earnings	13,00,000		Retained earnings	27,30,000
Common equity	52,00,000		Common equity	66,30,000
Total	97,50,000		Total	1,19,92,500

Jarmon's has to acquire additional capital of $ 0.195 (12187500 - 11992500) million to finance additional asset requirement.